Full opinion text
OPINION LORETTA A. PRESKA, District Judge. The U.S. Securities and Exchange Commission (“SEC”) filed this civil enforcement action on March 12, 2007, alleging that the defendants, various officers of Nortel Networks Corporation (“Nortel” or “the Company”), engaged in two distinct accounting fraud schemes. Under the first scheme, Defendants Frank A. Dunn (“Dunn”), Douglas C. Beatty (“Beatty”) and Maryanne E. Paha-pill (“Pahapill”) (collectively, the “Revenue Recognition Defendants”) allegedly adopted improper revenue recognition policies to inflate revenues reportable in the fourth quarter of 2000 (the “revenue recognition scheme”). Under the second scheme, Defendants Dunn, Beatty, Michael J. Gollogly (“Gollogly”) and Douglas A. Hamilton (“Hamilton”) (collectively, the “Earnings Management Defendants”), among others, are alleged to have improperly accrued, maintained and released reserves to manipulate Nortel’s earnings in the fourth quarter of 2002 and the first two quarters of 2003 (the “earnings management scheme”). Currently pending before the Court are motions [dkt. nos. 17, 20, 24, 33, 35] to dismiss the Complaint filed by Dunn, Beatty, Pahapill, Gollogly and Hamilton. For the reasons set forth below, those motions are DENIED. I. BACKGROUND According to the Complaint, Nortel is a Canadian corporation with its principal place of business in Toronto, Ontario, Canada, whose business is “the design, development, assembly, marketing, sale, licensing, installation, servicing and support for networking solutions.” (See Compl. ¶ 34.) During the relevant periods, Nortel’s common stock was registered with the SEC and traded on the New York and Toronto Stock Exchanges, and more than one-third of Nortel’s workforce was employed in the United States. (See id.) The Complaint describes the positions held by Defendants during each alleged fraud scheme. During the alleged revenue recognition scheme, Dunn was Nortel’s CFO, Beatty was Nortel’s Controller, and Pahapill was Nortel’s Vice President of Corporate Reporting and Assistant Controller. (See id. ¶¶ 26-27, 29.) During the alleged earnings management scheme, Dunn was Nortel’s CEO (and, for a period, its Acting CFO), Beatty was Nortel’s CFO, Gollogly was Nortel’s Controller, and Hamilton was Nortel’s Vice President of Finance in charge of Nortel’s Optical business unit (“Optical”). (See id. ¶¶ 26-28, 30.) The details of those alleged fraud schemes are described below, taking the facts alleged in the Complaint as true. See, e.g., Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993). A. Revenue Recognition Scheme 1. Fourth Quarter 2000 Projections On July 25, 2000, Nortel made public its consolidated financial results for the second quarter of that year in an earnings release reviewed and approved by Dunn (“Second Quarter 2000 Earnings Release”). (See Compl. ¶ 38.) In that release, Nortel projected an increase in anticipated revenue growth for the year from 30-35 to 40 percent, attributing that increase to the “momentum we have been experiencing during the first half’ of 2000. (Id.) On Nortel’s Second Quarter 2000 Earnings Call, Dunn reiterated that prediction, further attributing the increase to an anticipated strong performance in Nor-tel’s Optical unit, which he predicted would exceed $10 billion in sales for the year. (See id.) Soon after the Second Quarter 2000 Earnings Release, however, Nortel internally lowered its expectations for the remainder of 2000. (See id. ¶ 39.) Revised revenue projections for the third quarter were at least $405 million lower than anticipated levels, and earnings were projected to miss previous targets by at least $506 million. (See id.) Other internal estimates projected that yearly revenue would be more than $1 billion less than expected and, specifically, that sales in the Optical unit would miss projections by at least $500 million. (See id. ¶ 40.) Dunn was informed of the lowered third quarter expectations by one of Nortel’s finance vice presidents no later than September 15, 2000 (see id. ¶ 39); the yearly revenue and Optical sales projections were also shared with Dunn (see id. ¶ 40). Nevertheless, Nortel continued to make optimistic forecasts about its prospects for the end of 2000. During Nortel’s Third Quarter 2000 Earnings Call, Dunn allayed concerns about Optical’s softening sales. (See id. ¶ 43.) He rejected the suggestion that growth was waning; instead, he attributed Optical’s sales performance, which was reported at the low end of Nortel’s range of projections for the quarter, to the fact that customers were slow to install optical equipment and were working through existing inventories in the third quarter but stated that customers were expected to place further orders in the fourth quarter. (See id.) He did not mention Nortel’s revised internal projections, and, instead, Nortel reiterated its anticipated increase in growth and continued to predict that Optical’s sales would surpass $10 billion. (See id.) 2. Nortel Reintroduces “Bill and Hold” Transactions A “bill and hold” transaction is one where products that have been sold to a buyer remain in the possession of the seller until the buyer is willing to accept delivery. Though physical delivery is generally required before revenue may be recognized from the sale of a product, sellers are permitted to recognize revenue at the time of sale but before physical delivery for products sold on a bill and hold basis. See SEC Staff Accounting Bulletin No. 101, 64 Fed.Reg. 68936, 68938-39 (Dec. 9, 1999) (hereinafter “SAB No. 101”). The criteria required to classify a transaction as a bill and hold sale, and thus to recognize revenue on a product’s sale before physical delivery, are explained by the Commission in SAB No. 101. See id. at 68938 (“This staff accounting bulletin summarizes certain of the staffs views in applying generally accepted accounting principles [“GAAP”] to revenue recognition in financial statements.”). Among other things, that bulletin requires that “[t]he buyer, not the seller, must request that the transaction be on a bill and hold basis” and that the buyer “have a substantial business purpose for ordering the goods on a bill and hold basis ....” Id. In June 2000, Beatty and Pahapill, allegedly with Dunn’s knowledge, banned the use of bill and hold transactions, among other things, because GAAP requirements were thought to be too difficult to satisfy and because Nortel’s revenues had been strong enough without recording revenue on a bill and hold basis. (See Compl. ¶ 47.) Given its weakening internal projections, however, Nortel soon reversed course. In late October 2000, Beatty and Pahapill met with other senior finance managers to discuss how to increase revenues, including by reconsidering Nortel’s revenue recognition policies. (See id. ¶ 45.) At around the same time, Beatty and Pahapill asked Nortel’s outside auditor, Deloitte & Touche LLP (“Deloitte”), about the possibility of reintroducing bill and hold transactions. (see id. ¶ 48.) Deloitte presented them with charts explaining GAAP’s requirements to guide Nortel personnel in assessing whether revenue from particular sales of Nortel products could be recognized on a bill and hold basis (see id. ¶ 50), but Beatty and Pahapill instead prepared their own guidance (the “internal guid-anee”) which omitted key GAAP requirements (see id. ¶ 51). Deloitte protested, concluding that the internal guidance did not provide its intended users with enough information properly to assess the propriety of a bill and hold sale and asked Paha-pill to distribute its guidance to Nortel personnel together with the internal guidance. (See id. ¶ 52.) Pahapill demurred and, on November 7, 2000, distributed solely the internal guidance to certain Nor-tel accounting and finance personnel. (See id. ¶ 51.) On November 8, 2000, Beatty informed the recipients of the internal guidance that Nortel was reintroducing bill and hold transactions in an attempt to meet fiscal year 2000 fourth quarter revenue targets and directed them to formulate a plan to implement the new strategy. (See id. 54.) The recipients of the internal guidance returned to Beatty and Pahapill with a plan where Nortel’s sales force would approach customers and urge them to purchase Nortel products on a bill and hold basis. (See id. ¶ 55.) To effect the transactions, Nortel sales personnel would draft and forward to the customers “risk of loss” letters to be typed on customer letterhead. (See id. ¶ 58.) They targeted both customers who were expected to place orders in 2001, as well as new customers; they also asked customers with existing orders for 2001 to restructure their deals to include risk of loss terms. (See id. ¶ 56.) Such customers were offered price discounts, interest deferments and extended billing terms to induce them to purchase goods on a bill and hold basis. (See id.) Soon thereafter, Beatty and Pahapill were approached by Nortel compliance personnel who were concerned that the manner in which Nortel was obtaining risk of loss letters did not comply with GAAP requirements. (See id. ¶ 59.) During a December 8, 2000, conference call to address that concern, Beatty told compliance personnel that the transactions at issue were compliant so long as the risk of loss terms were evidenced on customer letterhead. (See id.) He also directed compliance personnel not to raise the issue again with Nor-tel’s sales people. (See id.) The plan was so successful that, by the end of 2000, more revenue was recognizable on a bill and hold basis than was necessary to meet Nortel’s fourth quarter 2000 revenue projections. (See id. ¶ 68.) Therefore, on January 5, 2001, Beatty instructed Pahapill and other Nortel finance vice presidents to identify low-value bill and hold entries that could be reversed; however, because it was critical to preserve Optical’s revenue, Beatty instructed that such reversals could only occur in non-Optical units. (See id. ¶ 69.) On January 7, 2001, Dunn, Beatty, Pahapill and others conducted a telephone conference to discuss and review each proposed reversal and select those that would reduce overall revenue while maintaining Optical revenues. (See id. ¶ 70.) On January 18, 2001, Nortel made public its Fourth Quarter 2000 Earnings Release, which was reviewed and approved by Dunn (see id. ¶ 74), and subsequently filed its 2000 10-K with the SEC on March 13, 2001 (see id. ¶ 76). In each, Nortel announced that it had met its projections for the fourth quarter and the year; in the Earnings Release, it announced further, albeit lower, anticipated growth for 2001. (See id. 1174. (“ ‘[T]he fourth quarter capped a year of exceptional growth, which was in line with ... expectations.’ ”); see also id. ¶ 76 (Nortel reported $8,818 billion in quarterly revenue and $30,275 billion in yearly revenue).) Among other Nortel business units, the 2000 Earnings Release touted Optical’s performance, noting that revenues “ ‘topped $10 billion for the year, more than doubling 1999 revenues,’ ” driven by “strong growth” in the United States and elsewhere. (Id. ¶ 74.) B. Earnings Management Scheme I. Identification of Excess Reserves The Complaint explains that, in 2001, as a result of losses sustained from an overall downturn in the telecommunications sector, Nortel initiated a company-wide restructuring plan that included substantial reductions in workforce, write-downs of assets and contract settlements. (See id. 1 81.) In the summer of 2002, however, Dunn (then Nortel’s CEO) reported that he expected Nortel to return to profitability by the second quarter of 2003 (see id. ¶ 98 (quoting Dunn and Beatty during Nortel’s Second and Third Quarter 2002 Earnings Calls)) and created a “return to profitability” (“RTP”) bonus program for Nortel employees as an incentive to meet that goal (see id. ¶¶ 82-83). Around the same time, analysts began to question why Nortel maintained such large reserves and expressed concern as to whether Nortel could satisfy those outstanding liabilities. (See id. ¶ 91.) According to the Complaint, “it was longstanding practice across Nortel to establish reserves on a ‘worst-case’ basis, which, in practice, meant at an amount equal to the maximum exposure.” (Id. ¶ 85.) Dunn emphasized this practice by exhorting employees to create sufficient reserves (see id. ¶ 88 (“Dunn communicated to employees that he wanted to deal with liabilities once and not readdress them in the future.”)) and encouraging the creation of excess reserves when quarterly results exceeded forecasts (see id. ¶ 89 (“ ‘[Nortel’s] general approach is to sand bag good news and close ‘hard’ to the forecast.’ ”)). Thus, not only did Nortel carry excess reserves that it had created in the general course of business, but Nortel “also ‘topped up’ existing reserve accounts in 2001, when it underwent its company-wide restructuring.” (Id. ¶ 90.) In response to analysts’ concerns about Nortel’s excess reserves, Beatty instructed Nortel personnel to ascertain the quantity and status of Nortel’s reserve balances. (Id. ¶ 92.) Each of Nortel’s business units undertook this reserve review process, and, thus, in October 2002, Hamilton reported that Optical was holding approximately $21 million in excess reserves. (See id. ¶ 94.) After compiling all the reserve estimates, staff reported to Beatty and Gollogly in October 2002 that Nortel was carrying at least $303 million in excess reserves. (See id. ¶ 96.) Beatty informed Dunn of this fact in early November 2002. (See id. ¶ 97.) The Complaint alleges that, instead of determining the appropriate accounting treatment for those excess reserves identified during this process, Dunn, Beatty and Gollogly instructed that those excess reserves be maintained on Nortel’s books for future earnings management purposes. (See id.) 2. Creation of Further Excess Reserves Though Dunn and Beatty had predicted Nortel’s return to profitability by the second quarter of 2003 (see id. ¶¶ 82-83, 98), internal projections showed that Nortel would report a pro forma profit by the fourth quarter of 2002 (see id. ¶ 99). This information was conveyed to Dunn, Beatty and Gollogly, causing Dunn particular concern: a pro forma profit would trigger the payment of RTP bonuses, and shareholders, thought Dunn, would “not react favorably to the payment of millions of dollars of bonuses at the end of a year in which the Company lost over $3 billion from its continuing operations.” (Id.) Dunn and Beatty were further concerned that, should Nortel report a loss in the first quarter of 2003, as internal projections forecast, the profits reported in the fourth quarter of 2002 would appear to be an aberration and not the stable return to profitability that they had forecast. (See id. ¶ 100.) Thus, Dunn and Beatty ordered the creation of excess reserves to reduce Nortel’s fourth quarter 2002 earnings. (See id.) Gollogly coordinated the reserve establishment effort, instructing the vice presidents in charge of Nortel’s business units to accrue additional reserves. (See id. ¶ 101.) Dunn and Beatty also contacted some business unit heads directly (see id.), and, on or about January 6, 2003, Beatty conducted a telephone conference with Hamilton and others reiterating that they were required to establish additional excess reserves “because the Company’s results were coming in better than expected” (id. ¶ 102). Each business unit’s proposed reserve entries, including Hamilton’s proposed $7 million in Optical reserves (see id. ¶ 103), were submitted to Gollogly in early January 2002, who then selectively incorporated enough of the proposed reserves to reduce fourth quarter earnings to “within a few million dollars of the $65 million loss” previously predicted by Dunn and Beatty (id. ¶ 104). According to the Complaint, this feat required some last minute finagling: the day before fourth quarter earnings were announced, Nortel decided to change its accounting treatment of the acquisition of 980 NPLC. (See id. ¶ 105; see also supra n. 12.) That change decreased Nor-tel’s fourth quarter 2002 earnings by an additional $25 million. (See Compl. ¶ 105.) To counter that decrease, Beatty and Gol-logly reversed $25 million of the reserve entries previously created by Nortel’s business unit heads and which had been vetted and selected by Gollogly. (See id.) On January 23, 2003, Nortel made public its Fourth Quarter 2002 Earnings Release, which was reviewed and approved by Dunn and Beatty (see id. ¶ 108), and filed its 2002 10-K with the SEC on March 10, 2003 (see id. ¶ 109). Reiterating Dunn’s prediction that Nortel would operate “just short of pro forma profitability,” both reported a quarterly pro forma loss of $62 million and a quarterly GAAP loss of $248 million. (See id. ¶¶ 108-09.) 3. First Quarter 2003 Release of Excess Reserves In addition to affecting earnings in 2002, the accounting adjustment associated with Nortel’s acquisition of 980 NPLC led Nor-tel personnel to adjust earnings forecasts for fiscal year 2003 from a projected profit to a net loss, (see id. ¶ 115.) Nevertheless, Dunn and Beatty continued publicly to forecast profitability in 2003 (see id. ¶¶ 116-17); indeed, Dunn regarded the possibility of not achieving profitability to be particularly ominous because he considered the payout of RTP bonuses essential to maintaining his management team (see id. ¶ 119). Therefore, Dunn and Beatty instructed Nortel staff to create “roadmaps” to ensure Nortel reported profitability in 2003. (see id. ¶ 118.) Distributed to Dunn, Beatty and Gollogly, the resulting roadmaps included revised consolidated earnings targets for each of Nortel’s business units and specified amounts each unit was expected to contribute to reach Nortel’s overall earnings targets. (See id. ¶ 120.) In a telephone conference on or about February 19, 2003, Beatty discussed those contribution amounts with the heads of Nor-tel’s business units, including Hamilton. {See id. ¶ 121.) Soon thereafter, the business unit heads, including Hamilton, indicated that they intended to meet their earnings contributions targets by releasing excess reserves and the amounts they planned to release were incorporated into the roadmaps. (See id.) Ultimately, Nortel met earnings targets for the first quarter of 2003 through the release of $361 million in reserves, $272 million of which were released specifically at the direction of Dunn, Beatty and Gol-logly. (See id. ¶ 123.) Of that $272 million, Hamilton caused $78 million of reserves accrued or maintained at Optical to be released on Optical’s books into earnings. (See id. ¶ 124.) Additionally, Nor-tel’s pro forma profit for the quarter triggered the payment of RTP bonuses for Nortel employees. {See id. ¶ 152.) On April 24, 2003, Nortel made public its First Quarter 2003 Earnings Release, which was reviewed and approved by Dunn and Beatty. {See id. ¶ 126.) In Nortel’s First Quarter 2003 Earnings Call, Dunn attributed Nortel’s performance to a strong business model. {See id. (“ ‘We had a very strong margin of performance and we continue to focus on driving a business model that continues to accelerate our margin as an overall objective in this business.’ ”).) In addition, in its First Quarter 2003 10-Q, filed with the SEC on May 9, 2003, Nortel reported that nearly $80 million was included in net earnings that resulted from “ ‘reductions in accruals principally related to the wind-down or integration activities’ ” of previously-acquired companies. {Id. ¶ 127.) 4. Second Quarter 2003 Release of Excess Reserves The earnings management scheme allegedly continued into the second quarter of 2003, with Nortel’s intended release of approximately $514 million in reserves, $370 million of which were designed solely to meet earnings projections. {See id. ¶ 133.) This time, however, nearly $142 million in planned releases had to be reversed after Deloitte expressed concern about the absence of support to justify the propriety and timing of those releases. (See id.) Specifically, when it became apparent that Nortel could not furnish sufficient support for the $80 million in reserve releases it reported in the first quarter of 2003, Deloitte cautioned Gollogly and informed Nortel’s Audit Committee that the propriety of Nortel’s reserve releases would require Deloitte’s attention. (See id. ¶¶ 134-35.) In a later meeting of Nor-tel’s Audit Committee, Deloitte suggested that Nortel should release reserves in the future only after management had reviewed those releases and specifically determined them to be adequately supported. (See id. ¶ 135.) With the approval of Dunn and Beatty, Gollogly tasked Nortel personnel to undertake such a review during the second quarter 2003 closing process and, in July 2003, disclosed to Deloitte that $142 million in proposed reserve releases for that quarter were unsupported. (See id. ¶¶ 136-37.) On or about July 7, 2003, Deloitte asked Nortel not to release that $142 million in reserves and, at yet another Audit Committee meeting, informed that Committee that a “reportable condition” had occurred under Statement of Auditing Standards No. 60 (“SAS No. 60”) with respect to Nortel’s reserve releases. (See id. ¶ 138.) Despite reversing those entries, however, the Complaint alleges that Nortel still released approximately $372 million in reserves into second quarter earnings (see id. ¶ 139) and, though recording a GAAP loss, reported a pro forma profit, again triggering the payment of further RTP bonuses (see id. ¶ 152). Of the $372 million .in reserve releases, approximately $228 million were specifically designed to meet earnings targets (see id. ¶ 139), including approximately $54 million in Optical reserves that Hamilton caused to be released and that were ultimately consolidated into Nortel’s second quarter financial statements (see id. ¶ 141). 5. The Restatements As concern grew about its reserve release practices, the Complaint alleges that Dunn, Beatty and Gollogly misled the public and Deloitte about the extent and nature of Nortel’s review of its reserve releases. For instance, in its Second Quarter 2003 Earnings Release, Nortel stated that it had reviewed its reserve balances because in 2003, unlike prior years, “ ‘relatively minor amounts may have a greater effect on reported results.’ ” (See id. ¶ 159.) Beatty reiterated the same justification in Nortel’s Second Quarter 2003 Earnings Call (see id.), and Nortel’s Second Quarter 2003 10-Q filed with the SEC on August 12, 2003, contained similar statements (see id. ¶ 161). According to the Complaint, those statements misleadingly failed to state that the true reason Nortel reviewed its reserve practices was because Deloitte had expressed concern as to their propriety. (See id. ¶ 160.) On October 23, 2003, the same day that Dunn and Beatty publicly forecast profitable results for the third quarter 2003 (see id. ¶ 163), Nortel announced that it would restate its financial statements (the “First Restatement”) (see id. ¶ 164). As alleged in the Complaint, Dunn and Beatty continued to mislead the public, this time about the First Restatement, by characterizing it as “an effort to clean up honest control lapses in prior years.” (Id.) On Nortel’s Third Quarter 2003 Earnings Call, for instance, Dunn explained that, during “ ‘a period of dramatic restructuring,’ ” Nortel had discovered some ‘“mistakes’” in its accounting (id. (‘“[T]he challenges that faced Nortel Networks and our industry over the past few years were unprecedented .... It is clear now that in such a volatile environment, errors were made.’ ”)), and Beatty made similar comments on the same call (see id. (stating that Nortel had decided to review reserves because “the ‘impact of materiality’ had recently changed as Nortel’s results were ‘picking around along break-even.’ ”)). On November 19, 2003, Nortel filed the First Restatement as part of its Third Quarter 2003 10-Q, restating approximately $948 million in total liabilities. (See id. ¶ 166.) As alleged in the Complaint, however, the “First Restatement was, in reality, a cover-up” (id. ¶ 13): not only did it offer the same allegedly misleading justifications as had been offered previously for Nortel’s reserve review, but it gave no indication of the misconduct that had precipitated the restatement and was so narrowly-focused that it did not capture much of the improper reserve releases effectuated to date (see id. ¶ 166). In early 2004, however, as Nortel’s Audit Committee allegedly began to unearth the true extent of the earnings management scheme, it determined that a further restatement was necessary. (See id. ¶¶ 169.) Soon thereafter, Nortel terminated Dunn, Beatty, Gollogly and Hamilton’s employment for cause. (See id.) On January 11, 2005, Nortel issued its Second Restatement, restating a further $746 million in liabilities and approximately $3.4 billion in revenues. (See id. ¶ 170.) The Second Restatement also disclosed the conclusion of the Audit Committee’s independent review of Nortel’s reserve practices that “Dunn, Beatty and Gollogly were responsible for Nortel’s improper use of reserves in the second half of 2002 and first half of 2003.” (Id. ¶ 170.) Further, in its 2005 10-K filed with the SEC in May 2006, Nortel for the first time disclosed that it had restated revenues in part due to an accounting fraud in which “ ‘the senior corporate management team ... changed accounting policies of the Company several times during 2000’ and that those changes were ‘driven by the need to close revenue and earnings gaps.’ ” (Id. ¶ 172.) II. DISCUSSION Among other things, the Complaint asserts claims against all Defendants for fraud and fraudulent misrepresentations in violation of § 17(a) of the Securities Act of 1933 (Claim 1) and § 10(b) of the Securities Exchange Act of 1934 and corresponding Rule 10b-5 (Claim 2). To state a violation of either § 10(b) or Rule 10b-5, the SEC must allege that a defendant “(1) made a material misrepresentation or a material omission as to which he had a duty to speak, or used a fraudulent device; (2) with scienter; (3) in connection with the purchase or sale of securities.” SEC v. Monarch Funding Corp., 192 F.3d 295, 308 (2d Cir.1999). “[E]ssentially the same elements must be established in connection with the offer or sale of a security” to state a violation of § 17(a). See SEC v. First Jersey Sec., Inc., 101 F.3d 1450, 1467 (2d Cir.1996). On these motions, Defendants challenge principally the SEC’s allegations of scien-ter, arguing that the facts in the Complaint bespeak mere accounting mistakes, not intentional wrongdoing. {See, e.g., Dunn Mem. 7-8.) Dunn, Beatty and Hamilton each also argues that, even if there was intentional misconduct at Nortel, the Complaint lacks allegations specific to each demonstrating his intentional misconduct. {See, e.g., id. at 22; Beatty Mem. 8, 15; Hamilton Mem. 14.) I address these arguments below collectively as the “scienter arguments.” Taking all factual allegations in the Complaint as true, see Leatherman, 507 U.S. at 164, 113 S.Ct. 1160, I conclude that the facts in the Complaint sufficiently allege that (i) the Revenue Recognition Defendants intentionally adopted revenue recognition policies that they knew violated GAAP (see infra Pt. II.B.l), and (ii) the Revenue Recognition Defendants recklessly disregarded the possibility that Nortel’s reserve accounting policies violated GAAP (see infra Pt. II.B.2). I further conclude (iii) that specific facts alleged illustrate Beatty’s knowing participation in (see infra Pt. Il.C.l(a)) and Dunn’s reckless ignorance of (see infra Pt. II.C.l(b)) the revenue recognition scheme; (iv) that specific facts alleged show Dunn and Beatty’s personal participation in the formulation and implementation of Nortel’s reserve accounting policies (see infra Pt. II.C.2(a)); and (v) that specific facts alleged show Hamilton’s participation in the earnings management scheme in reckless disregard for the requirements of GAAP {see infra Pt. II.C.2(b)(ii)). In addition, Pahapill argues that the Complaint must be dismissed against her for reasons similar to those endorsed by Judge Kaplan in United States v. Stein, 435 F.Supp.2d 330 (S.D.N.Y.2006), aff'd, 541 F.3d 130 (2d Cir.2008); see also Pahapill Mem. 12-13. I reject that argument for the reasons stated below. (See infra Pt. II.D.) Before taking up those arguments, however, I turn to the standards applicable to these motions. A. Pleading Scienter Under Rule 9(b) and the Private Securities Litigation Reform Act (‘PSLRA”) Rule 9(b) of the Federal Rules of Civil Procedure establishes standards that govern pleading allegations of fraud. See, e.g., Rombach v. Chang, 355 F.3d 164, 171 (2d Cir.2004). It states that: In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally. Fed.R.Civ.P. 9(b). Discussing that rule in the securities fraud context, however, the Court of Appeals for the Second Circuit cautioned that “the relaxation of Rule 9(b)’s specificity requirement for scienter must not be mistaken for license to base claims of fraud on speculation and conclu-sory allegations.” Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir.1994) (quotations omitted). Instead, to plead scienter adequately in such an action, a complaint was required to allege facts giving rise to a “strong inference” of fraudulent intent. Cf. Ross v. A.H. Robins Co., Inc., 607 F.2d 545, 558 (2d Cir.1979); Denny v. Barber, 576 F.2d 465, 470 (2d Cir.1978). Such a strong inference could be established “(a) by alleging facts to show that defendants had both motive and opportunity to commit fraud, or (b) by alleging facts that constitute strong circumstantial evidence of conscious misbehavior or recklessness.” Shields, 25 F.3d at 1128. Not all Courts of Appeals endorsed the Second Circuit’s interpretation that Rule 9(b) requires allegations giving rise to a “strong inference” of scienter in securities fraud cases. See, e.g., Tellabs, 127 S.Ct. at 2507-08 (collecting cases). Partly to achieve uniformity on that issue, see id. at 2508, Congress enacted the Private Securities Litigation Reform Act (“PSLRA”), see Pub.L. No. 104-67, 109 Stat. 737 (Dec. 22, 1995) (codified in part at 15 U.S.C. § 78u), which “heightened the requirement for pleading scienter to the level [adopted] by the Second Circuit: Plaintiffs must ‘state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.’ ” Press v. Chem. Inv. Servs. Corp., 166 F.3d 529, 537-38 (2d Cir.1999) (quoting 15 U.S.C. § 78u-4(b)(2)). Because no good deed goes unpunished, however, divergence persisted after passage of the PSLRA: the Courts of Appeals disagreed about what constituted a “strong inference” of fraudulent intent and, specifically, whether Congress intended to codify pre-existing Second Circuit caselaw in that area. Compare id. at 538 (adopting Second Circuit precedent), and In re Advanta Corp. Sec. Litig., 180 F.3d 525, 534 (3rd Cir.1999) (“[T]he [PSLRA] establishes a pleading standard approximately equal in stringency to that of the Second Circuit.”), with In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 978 (9th Cir.1999) (“Congress did not codify the Second Circuit case law [but rather] sought to raise the standard above all existing requirements.”). The Supreme Court resolved that divergence in Tellabs. It clarified that Congress had not codified pre-existing Second Circuit precedent, see Tellabs, 127 S.Ct. at 2509; see also In re Silicon Graphics, 183 F.3d at 978 (“[A]lthough Congress derived the PSLRA ‘strong inference’ language from the Second Circuit, it rejected the less stringent Second Circuit case law interpreting that ‘strong inference’ language.”), and held that an inference of scienter would satisfy the PSLRA’s “strong inference” standard “only if a reasonable person would deem the inference of scienter cogent and at least as compelling as any opposing inference one could draw from the facts alleged.” Tellabs, 127 S.Ct. at 2510. The Court explained that a district court “must take into account plausible opposing inferences,” id. at 2509, and, while the inference of scienter “need not be irrefutable ... or even the most plausible of competing inferences,” id. at 2510 (quotation omitted), it “must be more than merely ‘reasonable’ or ‘permissible’ — it must be cogent and compelling, thus strong in light of other explanations.” Id. Of course, by its terms, the PSLRA does not apply to this SEC enforcement action. See 15 U.S.C. § 78u-4(a)(l) (“The provisions of this subsection shall apply in each private action arising under this chapter”); see also Dunn Mem. 21 n. 8. Nevertheless, Defendants ask this Court to apply the PSLRA’s “strong inference” standard in lieu of the Second Circuit’s Rule 9(b) “strong inference” standard. (See Beatty Mem. 7; Dunn Mem. 21 n. 8; Hamilton Mem. 18-14.) Under the PSLRA’s comparative standard, argue Defendants, the SEC fails to allege fraud because, taking the Complaint as true, the inference of intentional misconduct is not as plausible as other non-culpable inferences. (See Dunn Mem. 9-11, 16.) They portray the alleged conduct at Nortel as a series of innocent mistakes about complicated accounting principles and argue that “[a]c-counting mistakes, even mistakes that require a company’s financial results to be restated, do not constitute fraud.” (Id. at 7; see also id. at 8 (“[T]o determine whether a securities fraud plaintiff has sufficiently alleged not just accounting mistakes but intentional deception, courts must weigh competing inferences, including inferences favorable to defendants.” (citing Tellabs, 127 S.Ct. at 2511)).) The Court of Appeals has yet to decide Tellabs’ effect on the requirements for pleading scienter in actions governed by Rule 9(b) but not governed by the PSLRA. See SEC v. Collins & Aikman Corp., 524 F.Supp.2d 477, 488 (S.D.N.Y.2007) (noting question but declining to decide “whether district courts must now [after Tellabs ] find that the inference of scienter raised in actions not governed by the PSLRA, but governed by Rule 9(b), be at least as compelling as any other inference”). Nevertheless, I decline Defendants’ invitation to extend the PSLRA “strong inference” formulation beyond the limits of the PSLRA. Any argument that Congress intended to apply the provisions of the PSLRA to SEC enforcement actions ignores the statute’s plain language. See 15 U.S.C. § 78u-4(a)(l). Indeed, as the Supreme Court explained, Congress designed the PSLRA specifically to address the perceived abuses of private securities litigation. See Tellabs, 127 S.Ct. at 2508. Extending its “heightened standard” to SEC enforcement actions, a context not found by Congress to harbor such abuses, does violence to that intent: had Congress wanted the PSLRA to restrain the SEC’s ability to plead securities fraud, it could have said so easily. Nor does the Tellabs decision indicate any intention to announce a broader Rule 9(b) standard. Defendants cling to the thin reed that both standards bear the same name (see Dunn Mem. 21 n. 8), but that fact does not illustrate Congress’ attempt to usurp the broader Rule 9(b) jurisprudence. See, e.g., In re Silicon Graphics, 183 F.3d at 979 (“Congress adopted the Second Circuit’s ‘strong inference’ language only because it was facially more stringent than the ‘reasonable inference’ standard in other circuits.”). Instead, as the Supreme Court acknowledged in Tel-labs, the PSLRA created a distinct, heightened pleading standard for private securities actions, separate and apart from the general requirements of Rule 9(b). See Tellabs, 127 S.Ct. at 2509 (“While adopting the Second Circuit’s ‘strong inference’ standard, Congress did not codify that Circuit’s case law interpreting the standard.”); see also 2 James Wm. Moore, Moore’s Federal Practice § 9.03[6][a] [i] (3d ed.2008) (noting that PSLRA’s pleading standards supplement Rule 9(b) requirements). It was that distinct, heightened pleading standard that formed the subject matter of the Tellabs decision, not the broader Rule 9(b) standards. Defendants cite two decisions from this District for the proposition that the Tel-labs PSLRA “strong inference” test should apply in the broader Rule 9(b) context, but neither is persuasive. In In re Crude Oil Commodity Litig., 06 Civ. 6677, 2007 WL 1946553 (S.D.N.Y. June 28, 2007), the court cited Tellabs and Bell Atlantic v. Twombly, 550 U.S. 544, —, 127 S.Ct. 1955, 1969, 167 L.Ed.2d 929 (2007), to support its contention that the “adoption of a heightened pleading standard in the context of [market manipulation claims under § 9(a)(2) Commodities Exchange Act (“CEA”) ] is in conformity with the direction of the Court.” See In re Crude, 2007 WL 1946553 at *7 n. 5. That court’s recognition of the Supreme Court’s recent precedent imposing stricter pleading standards, however, does not offer Defendants any support here. To the contrary, in assessing scienter under the CEA, the In re Crude court explicitly employed the Second Circuit’s pre-Tellabs Rule 9(b) “strong inference” standard. See id. at *8 (quoting Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290-91 (2d Cir.2006)). Glidepath Holding B.V. v. Spherion Corp., No. 04 Civ. 9758, 2007 WL 2176072 (S.D.N.Y. July 26, 2007), is equally unavailing. There, the court acknowledged that Rule 9(b) requires a complaint alleging fraud to state facts giving rise to a “strong inference” of fraudulent intent, see id. at *10 (citing Shields, 25 F.3d at 1128), but applied the Tellabs formulation of that standard because “[t]he Second Circuit has not defined what constitutes a ‘strong inference’ in the common law fraud context with the level of detail that the Supreme Court used in Tellabs.” Id. at *10 n. 5. The court nevertheless proceeded to analyze scienter guided by various Second Circuit precedents on the issue, including those setting forth this Circuit’s pr e-Tel-labs Rule 9(b) standard. See id. at *12-15 (citing Lerner, 459 F.3d at 291, Cohen v. Koenig, 25 F.3d 1168, 1173 (2d Cir.1994), and Shields, 25 F.3d at 1128). Neither decision addressed the instant question squarely, let alone with the benefit of full briefing. In any event, to the extent that either decision can be said to stand for the proposition that the PSLRA “strong inference” standard applies to all pleadings governed by Rule 9(b), I respectfully disagree for the reasons stated above. B. The Complaint Adequately States Scienter 1. The Revenue Recognition Scheme The facts alleged in the Complaint, taken as true, constitute strong evidence supporting the inference that Nortel personnel purposely recognized revenue improperly. They establish that (1) the Revenue Recognition Defendants knew that Nortel had prohibited bill and hold transactions in early 2000 because GAAP’s requirements were too difficult to comply with (see Compl. ¶ 47); (2) the Revenue Recognition Defendants knew GAAP’s requirements for recognizing revenue on bill and hold transactions (see id. ¶¶ 47-48, 50); (3) the Revenue Recognition Defendants knew that Nortel would not be able to meet revenue forecasts for the fourth quarter of 2000 (see id. ¶¶ 38-40, 43); (4) the Revenue Recognition Defendants established internal rules, through the internal guidance, for recognizing revenue on bill and hold transactions that disregarded certain of those requirements (see id. ¶¶ 51, 54-56); and (5) the Revenue Recognition Defendants knew that the internal rules were deficient (see id. ¶¶ 52, 59) but instituted them anyway to meet revenue forecasts (see id. ¶¶ 45, 68-70). Taken as true, such conduct constitutes strong direct evidence that the Revenue Recognition Defendants intentionally violated GAAP to misstate revenue. These Defendants contest several points. They point out, for instance, that they were not familiar with GAAP requirements because “Nortel had been reporting its results under U.S. GAAP only since January 2000” (Dunn Mem. 9 (citing Compl. ¶ 37)) and observe that the decision whether to recognize revenue on bill and hold transactions “involves significant judgment” (see id.). From this, they argue, it is more plausible to conclude that Pahapill distributed the vague internal guidance, not to enable fraud, but because “she wanted Nortel staff to consult her on U.S. GAAP revenue recognition.” (See id. at 10.) The Revenue Recognition Defendants also suggest that Nortel did not violate SAB No. 101 by soliciting bill and hold transactions (see id.); regardless, they argue that it is more plausible that those solicitations were intended to inform Nor-tel’s customers that it was resuming the use of bill and hold transactions, not to commit accounting fraud (see id. at 11). Finally, Defendants argue that it is implausible that the bill and hold “scheme” was designed to engineer revenue results when, in fact, Nortel reversed several such entries, “thereby reducing revenue and complying with GAAP.” (See id. at 11-12.) Indeed, the Revenue Recognition Defendants dispute the rationality of any explanation whereby Nortel would want to reduce reported revenues, “as if exceeding revenue expectations would have hurt a telecommunications company in the midst of a major industry downturn.” (Id. at 12.) Evidence may ultimately bear out these Defendants’ suggestion that the conduct at issue was not intentional misconduct. That fact issue, however, is irrelevant at this stage of the litigation. The only question here is whether the facts alleged in the Complaint, when taken as true, constitute “strong circumstantial evidence of conscious misbehavior or recklessness.” Shields, 25 F.3d at 1128. As above, I conclude that they do. This holding is not inconsistent with my decision in In re Bristol-Myers Squibb Securities Litigation, 312 F.Supp.2d 549 (S.D.N.Y.2004). In that case, among other things, a corporate defendant had restated its financial statements to reflect a changed accounting treatment for certain sales. See id. at 563-64. Alleging nothing more than that the application of the prior accounting treatment was fraud, plaintiffs filed a complaint that I dismissed for failure to state scienter under the PSLRA. Unlike the Complaint at issue here, the complaint in Bristol-Myers alleged no facts beyond the restatement to support the inference that the prior accounting error amounted to intentional misconduct. See id. at 568. Indeed, that was not a case of competing plausible inferences: the facts alleged gave rise to only one inference. The same cannot be said about the Complaint here: Beatty and Pahapill were told by Nortel’s outside auditors, as well as in-house compliance personnel, that its accounting guidance for bill and hold transactions was wrong. They nevertheless continued to make decisions with respect to bill and hold transactions, with Dunn’s approval, contrary to GAAP requirements and solely for the purpose of bringing in earnings numbers consistent with management’s forecasts. These facts are more than adequate to support the inference that the Revenue Recognition Defendants consciously chose a violative accounting scheme. 2. The Earnings Management Scheme The facts alleged in the Complaint as to the earnings management scheme, taken as true, establish that the Earnings Management Defendants created, maintained and released reserves selectively to meet earnings forecasts. (See Compl. ¶¶ 100-05, 118, 120-21, 133.) They establish that earnings management was (and was intended to be) the sole purpose behind the reserves accounting policy. (See id. ¶¶ 100-02.) The only question, therefore, is whether the Complaint alleges facts establishing that these Defendants “knew or should have known that the reserves were inappropriate at the time they were established (or reversed).” See, e.g., In re Bristol-Myers, 312 F.Supp.2d at 569. The SEC does not allege, however, that the Earnings Management Defendants knew, at the time of the earnings management scheme, that the reserves accounting policy violated GAAP. Absent are allegations that the Earnings Management Defendants were made aware — either by Nortel’s outside auditors or by internal compliance personnel — that the policy was inappropriate. Instead, the Complaint’s allegations amount to intentional disregard for GAAP accounting rules: the Earnings Management Defendants adopted an accounting policy for particular reasons — to manage earnings — and ignored whether that policy accorded with applicable accounting principles. (See, e.g., SEC Opp’n 46, 48 (“[Nortel personnel] knew the additional reserves ... were not established for valid business reasons, but instead were established solely to enable them to reverse-engineer Nortel’s [financial] results”).) That is to say, the Complaint alleges an accounting scheme designed, not as a bona fide attempt to comply with accounting principles, but rather solely to orchestrate earnings. The precise question, therefore, is whether this conduct, as it is alleged in the Complaint, amounts to the kind of recklessness that is sufficient to give rise to a “strong inference” of scienter. I hold that it does. To adopt an accounting policy without any regard for what is required under relevant accounting principles amounts to “[a]n egregious refusal to see the obvious.” Chill, 101 F.3d at 269. Indeed, to do so with the intention of conveying an appearance of success despite knowledge of the contrary is the quintessence of an “intent to deceive, manipulate, or defraud.” Hochfelder, 425 U.S. at 193, 96 S.Ct. 1375; see also Aaron v. SEC, 446 U.S. 680, 691, 100 S.Ct. 1945, 64 L.Ed.2d 611 (1980). Accounting for the financial results of a large publicly-traded company is a highly complicated task. It is subject to complex rules sprawling over pages from diverse sources of authority. And it is an immensely important task upon which rests, at least in part, the integrity of the securities markets. To undertake that task in complete derogation of the attendant legal and accounting guidelines constitutes the kind of “highly unreasonable” conduct “which represents an extreme departure from the standards of ordinary care .... ” See In re Carter-Wallace, 220 F.3d at 39. Again, the Earnings Management Defendants argue that non-culpable inferences “overwhelm any possible inference of fraud.” (Dunn Mem. 13.) According to these Defendants, the fact that overbooking reserves was a long-standing policy, historically disclosed to Deloitte, “negates any suggestion that anyone at Nortel was ever aware that this practice violated GAAP.” (Id. at 14.) Further, the fact that Nortel engaged Deloitte in the Summer of 2002 to evaluate the size of any then-existing excess reserves and further consulted with Deloitte in 2003 about its release of reserves “utterly undermine[s] any inference of fraud.” (Id. at 18.) As before, while arguing that these isolated factual allegations support competing inferences may ultimately bear fruit for these Defendants later in this litigation, at this stage they do nothing to undermine the conclusion that the allegations in the Complaint, taken as true, constitute strong circumstantial evidence of reckless behavior sufficient to support an inference of scienter. Similarly, Defendants argue that the Complaint fails to allege which of the allegedly improperly accrued, maintained or released reserves were restated and, thus, reflected false statements. (See Dunn Reply 7-8; Hamilton Reply 5-6.) Instead, the Earnings Management Defendants offer facts outside the Complaint to support their argument that, in fact, much of the reserve activity was not improper: they allege that $222 million of the $303 million in reserves that were allegedly improperly maintained in the fourth quarter of 2002 were, in fact, released during that quarter (see Dunn Mem. 15) and that $66.3 million of the $151 million in reserves that were allegedly improperly accrued in that same quarter were found to comply with GAAP (see Dunn Reply 8). That argument, however, is more properly suited to summary judgment. This motion tests only the sufficiency of the Complaint’s allegations. Taking those allegations as true, the Complaint demonstrates that reserves were accrued, maintained and released selectively, in reckless disregard for governing GAAP principles and solely to manage earnings. It identifies material amounts from each quarter that the SEC alleges were the subjects of that reckless program of accruing, maintaining and releasing reserves. (See Compl. ¶¶ 94, 96, 103, 104-05, 123-24, 139, 141.) It alleges that, the First Restatement restated $948 million in reserves and that the Second Restatement restated a further $746 million in reserves. (See id. ¶¶ 166, 170.) It also alleges that the Second Restatement admitted that Dunn, Beatty and Gollogly “were responsible for Nortel’s improper use of reserves in the second half of 2002 and first half of 2003” (id.). Of course, while Rule 9 requires that the facts constituting fraud be stated with particularity, the primary purpose of that rule was “to afford defendant fair notice of the plaintiffs claim and the factual ground upon which it is based,” Ross v. Bolton, 904 F.2d 819, 823 (2d Cir.1990), and not to act “as an insurmountable hurdle for plaintiffs to overcome .... ” H.A.B. Assocs. v. Hines, No. 90 Civ. 186, 1990 WL 170514, *2 (S.D.N.Y. Oct.26, 1990) (citing DiVittorio v. Equidyne Extractive Indus., Inc., 822 F.2d 1242, 1247 (2d Cir.1987)). For that reason, I conclude that the Complaint states with sufficient particularity what reserves it challenges as improper and for what reason. C. Pleading Scienter as to the Individual Defendants 1. The Revenue Recognition Scheme As discussed above, the Complaint alleges that the Revenue Recognition Defendants knew that Nortel’s accounting of bill and hold transactions violated GAAP but proceeded with that accounting scheme nonetheless. Those allegations, taken as true, constitute direct evidence of conscious misconduct sufficient to support the strong inference of scienter required to state securities fraud. Nevertheless, Defendants Dunn and Beatty each argues that the Complaint fails to include allegations specific to him demonstrating that he acted with such scienter. {See, e.g., Beatty Mem. 8; Dunn Mem. 22.) I disagree for the reasons set forth below. a. Beatty and Pahapill Among other things, the Complaint alleges that Beatty (together with Pahapill) initially banned the use of bill and hold transactions (see Compl. ¶ 47), that the two then discussed the requirements for recognizing revenue on bill and hold transactions with Deloitte (see id. ¶ 49), that Beatty (together with Pahapill) drafted the internal guidance that ignored certain criteria explained to them by Deloitte (see id. ¶ 51), that he (together with Pahapill) knew and approved the plan formulated by Nortel staff to solicit bill and hold transactions (see id. ¶¶ 55-56, 58) and that he (and Pahapill) were approached by compliance staff with the staffs concerns that the bill and hold transactions violated GAAP (see id. ¶ 59). Those allegations amply support an inference that Beatty and Pahapill knew Nortel’s bill and hold accounting violated GAAP and that they implemented it despite that knowledge. In his defense, Beatty points out that the Complaint alleges that Deloitte’s warnings were conveyed only to Pahapill. (See Beatty 10; see also Compl. ¶ 52.) The additional factual allegations in the Complaint, however — understanding GAAP requirements sufficiently to conclude that Nortel should ban bill and hold transactions, discussing the requirements with Deloitte and drafting the deficient internal guidance, and persisting in the face of concerns expressed by Nortel compliance staff that Nortel’s bill and hold policy was not GAAP compliant — adequately support the inference that he knew the Nortel’s later bill and hold transactions were improper. Beatty also argues that facts not plead in the Complaint about compliance personnel’s concerns — “who particularly raised those concerns ... whether anyone on the call disagreed with Beatty’s supposed directive, [or] whether the compliance personnel followed Beatty’s supposed directive” — renders the allegations about those concerns insufficiently specific to support inferences adverse to him. (Beatty Mem. 12.) While the further facts he posits may ultimately support his argument, the only facts I am currently permitted to consider are those alleged in the Complaint. Those allegations, as discussed above, are sufficient to support a strong inference that Beatty acted with scienter. b. Dunn The Complaint alleges that Dunn was aware of weakening internal revenue projections (see Compl. ¶¶ 39-40), that he knew bill and hold transactions had previously been banned at Nortel because their requirements were too difficult to satisfy (see id. ¶ 47), that he knew the specifics of the accounting change proposed by Beatty and Pahapill reintroducing bill and hold transactions (see id. ¶¶ 53, 55) and that he participated in the review and selective reversal of entries with the ambition of engineering Nortel’s results (see id. ¶¶ 70); see also SEC Opp’n 30-31. Labeling the Complaint’s allegations conclusory, Dunn argues that, in fact, he was not aware of the details of the plan to implement bill and hold transactions and that knowledge of that plan cannot be imputed to him based solely on his then-position as CFO. (See Dunn Reply 14-15 (citing City of Brockton Retirement System v. Shaw Group Inc., 540 F.Supp.2d 464, 473 (S.D.N.Y.2008), In re Rhodia S.A. Sec. Litig., 531 F.Supp.2d 527, 550 (S.D.N.Y.2007), In re Sotheby’s Holdings, Inc., No. 00 Civ. 1041, 2000 WL 1234601, *7 (S.D.N.Y., Aug. 31, 2000) and Duncan v. Pencer, No. 94 Civ. 321, 1996 WL 19043, *14 (S.D.N.Y. Jan.18, 1996)).) Further, even if he did know the specifics of the plan, Dunn argues that there are no allegations, like those with regard to Pahapill and Beatty, demonstrating that he knew the bill and hold transactions were improper under GAAP. (See Dunn Mem. 23.) On both questions, however, the Complaint adequately pleads Dunn’s recklessness. Dunn personally assured the public that Nortel, and specifically Optical, would reach projected targets for fiscal year 2000 (see Compl. ¶ 38), even while he was aware that Nortel’s internal forecasts projected reduced revenues for those periods (see id. ¶¶ 39-41). Dunn, as CFO (see id. ¶ 26), aware of the importance of those targets (see id. ¶ 43), was aware that bill and hold transaction had been banned because GAAP requirements for such transactions were far too difficult to meet (see id. ¶ 47) and presided over the reintroduction of bill and hold transactions the accounting for which was not GAAP compliant (see id. ¶¶ 53, 55). Moreover, he personally reviewed specific accounting entries, including bill and hold transactions, and reversed certain non-Optical entries to conform to his earlier revenue projections. (See id. ¶¶ 68-70.) Given Dunn’s alleged involvement in the bill and hold accounting change and knowing the impact that the change had on Nortel’s results and his review of specific accounting entries, failure to investigate further the details and propriety of the bill and hold transactions by a person in Dunn’s senior financial position constitutes “ ‘an extreme departure from the standards of ordinary care,’ ” In re Carter-Wallace, 220 F.3d at 39, and “[a]n egregious refusal to see the obvious, or to investigate the doubtful.” Chill, 101 F.3d at 269. Dunn invokes SEC v. Todd, No. 03 Civ. 2230, 2006 WL 1564892 (S.D.Cal. May 30, 2006), but that decision does not support his cause. There, the court granted summary judgment for a defendant CEO on the ground that no reasonable fact finder could conclude that the CEO knew or should have known of certain accounting improprieties at his company. Id. at *7. The mere fact that the defendant knew of the transaction did not support an inference that he knew it violated GAAP, however, because he “was not an accountant, [and did not] have accounting expertise sufficient to challenge the treatment given to any particular transaction.” Id. Moreover, upon learning that there might be something suspicious with the accounting at issue, the defendant in Todd “followed up with a team put together to vet the accounting, including the Vice President of Ethics and Compliance.” Id. Such facts, particularly the formulation of the vetting team, stand in stark contrast to the allegations in the Complaint described above. 2. The Earnings Management Scheme As discussed above, the Complaint alleges that the Earnings Management Defendants disregarded accounting principles governing the accrual, maintenance and release of reserves and, instead, accrued, maintained and released those reserves solely to manage earnings. Those allegations, taken as true, amount to recklessness sufficient to support the strong inference of scienter required to plead securities fraud. Defendants Dunn, Beatty and Hamilton each argues that the Complaint fails to include allegations specific to him showing that he exhibited that level of recklessness. Again, I disagree for the reasons set forth below. a. Dunn and Beatty The Complaint alleges that Dunn encouraged the creation of excess reserves generally (see Compl. ¶ 88), in particular to reduce unanticipated increases in earnings in order to hew close to forecasts (see id. ¶ 89). It alleges that Dunn and Beatty knew Nortel was carrying excess reserves — that is, reserves not authorized by governing accounting principles — in 2002 (see id. ¶¶ 96-97) and maintained those reserves for future earnings management purposes (see id. ¶¶ 97). It further alleges that they knew internal projections forecast unanticipated increases in earnings (see id. ¶¶ 98-99) and that they ordered such unanticipated earnings to be reduced through the creation of further reserves (see id. ¶ 100). The Complaint alleges that Beatty personally conveyed the substance of the plan to various Nortel business unit heads. (See id. ¶ 102.) It also alleges that Beatty, with Dunn’s knowledge, further manipulated reserve balances solely to compensate for a last-minute accounting change. (See id. ¶ 105.) Then, when Dunn and Beatty became aware that internal projections forecast unanticipated decreases in earnings for 2003 (see id. ¶¶ 115, 117), the Complaint alleges Dunn authorized a coordinated plan to release reserves company-wide in order to meet earnings projections (see id. ¶¶ 118, 120). By this strategy, Nortel personnel, including Dunn and Beatty, released reserves into earnings in both the first and second quarters of 2003, enabling Nortel to meet (or, in the second quarter, come close to) its earnings forecasts. (See id. ¶¶ 123, 133, 139). These allegations are more than adequate to show Dunn and Beatty’s personal participation in the formation and implementation of the earnings management scheme, whose formation and implementation I concluded above exhibited a reckless disregard for proper accounting principles. Dunn and Beatty both argue that the allegations in the Complaint fail to show that either knew the reserves accounting policy violated GAAP. (See, e.g., Dunn Mem. 25-26; Beatty Mem. 17.) Because I hold above that the Complaint adequately states scienter by alleging facts constituting their reckless disregard for the governing accounting principles, this argument is irrelevant. Taking aim at this, Dunn offers the following: Companies can meet earnings targets in part by establishing or releasing reserves as long as those reserves were established or released in compliance with GAAP. The allegation that a defe